The Name Of The Game When You’re In Lean Periods

A reort from the Wall Street Journal. “The mortgage-market slowdown is stirring up interest in a humdrum segment of American home lending: the rights to the arcane task of handling monthly payments. Sales of so-called mortgage-servicing rights jumped 14% in 2018 from a ear earlier, according to Inside Mortgage Finance. In the final three months of 2018, the servicing changed hands on loans worth $183 billion, up 27% from the previous year.”

“The increase in servicing transfers is the latest ripple effect from a slowdown in the housing market, which has forced lenders to slim down, consolidate or close up shop. Many of the sellers are independent mortgage lenders that don’t have deposits to fund themselves or other lines of business that can help them withstand a downturn.”

“‘The name of the game when you’re in lean periods of origination and you’re not a bank is that you need sources of cash,’ said Eric Schuppenhauer, president of home mortgages at Citizens Financial Group Inc. ‘You’re just trying to make it to the next good origination period.'”

“Ditech Holding Corp., which filed for bankruptcy this week, could sell its servicing rights, analysts say. Keefe, Bruyette & Woods Inc. estimated Ditech has servicing rights on $104 billion of loans that it could sell.”

From KY3 on Missouri. “Some properties owned by Chris Gatley’s 417 Rentals, LLC are facing foreclosure. The foreclosures can take place since 417 Rentals, LLC bankruptcy case has been dismissed. Many renters facing foreclosure told KY3/KSPR they were unaware this was taking place.”

From News 5 Cleveland. “Northeast Ohio housing experts say it’s yet another indication of how hard our area was hit by the 2008 housing crash. According to ATTOM Data Solutions, Northeast Ohio has six zip codes where more than half the homeowners have mortgage loans that have a higher balance than what their home is currently worth.”

“Former Cuyahoga County Treasurer Jim Rokakis told News 5 there are ways to recover housing values in these neighborhoods, but he said it will be a slow and difficult process. ‘It’s the greatest financial crisis of our lifetime,’ Rokakis said. ‘It’s tragic for a lot of reasons. It’s tragic because it has proved to be a wealth stripper. All those people out there, 65, 70, 75 year old, who because of the mortgage crisis, have seen their houses lose 50, 60, 70 percent of its value.'”

From New Jersey TV News. “Senators told horror stories at a State House committee meeting about foreclosed apartment buildings that end up vacant and abandoned, leaving officials in Jersey City, Hoboken, and Union City with no one to even contact. Sen. Brian Stack claimed tenants get lured out by mortgage holders.”

“‘They’ll send a realtor or somebody there called Cash for Keys, which I encourage every tenant not to participate in, because where do they go from there? And that’s been a major problem,’ he said. ‘I can’t even get them out there to board properties most of the time. We send letters out, constantly. I was out there, we were boarding up properties, 10:30 last night I was on the scene with the police department, that the property’s not secure.'”

The Houston Chronicle in Texas. “Home sales fell for the third straight month in January, as buyers closed on 362 fewer homes than they did last year at the same time, according to the Houston Association of Realtors.”

“‘January appears to have delivered a perfect economic storm of sorts, with some consumers focused on paying off holiday credit card bills, others concerned about the recent bump in mortgage rates and still others that may have felt the squeeze from the partial government shutdown,’ Shannon Cobb Evans, the association’s chair, said in a statement.”

From AZ Big Media on Arizona. “On a mission to make trading-in your home as easy as trading-in your car, Knock announced the expansion of its revolutionary Home Trade-in platform to Phoenix.”

“Signs are pointing toward buyers increasingly being deterred by overvalued home prices: In January closed sales were down 12.6 percent year over year, and listings under contract were down 15 percent. In 2018, 66 percent of listings that did sell did so for less than their original asking price, according to the latest National Knock Deals Forecast.”

From Miami Today on Florida. “In Miami’s overbuilt high-end condominium market, a complex game of cat-and-mouse is being played, as sellers try to push their advantage and buyers shop for bargains, observers say.”

“‘The No. 1 metric in our industry to measure the health of the market is the number of remaining months of supply: today’s inventory divided by the average number of monthly sales,’ said Ron Shuffield, CEO of EWM Realty International. ‘The remaining supply of Miami-Dade condos priced at $1 million or more reflected 57 months’ supply (based upon fourth quarter 2018 sales). The optimum supply for properties priced in excess of $1 million ranges from 12 to 18 months. This over-supply, of almost a five-year inventory, will continue to place pressure on pricing.'”

“The inventory of units priced at $1 million or more locally as of Dec 31, 2018, has ‘risen to the highest number in history, 3,092 units actively for sale in the Southeast Florida Regional Multiple Listing Service,’ Mr. Shuffield said. ‘This inventory reflected an 11.6% increase over the number of high-end condos that were for sale on Dec 31, 2017, (3,092 units versus 2,771 units). and, a 44.4% increase from the active inventory on Dec. 31, 2015, (3,092 units vs 2,142 units).'”

“‘In the high-end condominium sector, we are seeing a market with more certainty,’ said Henry Torres, president and CEO of The Astor Companies. ‘In Coral Gables, nobody is giving anything away when it comes to pricing.'”

A press release from the California used house salespeople. “Lower seasonal home prices allowed more Californians to afford a home purchase in the fourth quarter of 2018 compared to the previous quarter, but higher interest rates pushed affordability lower compared to the previous year, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today.”

“Housing affordability in Santa Barbara County jumped from 18 percent in fourth-quarter 2017 to 32 percent in fourth-quarter 2018, primarily due to a sharp drop in the median home price, which fell from $710,000 in fourth-quarter 2017 to $514,950 in fourth-quarter 2018.”

“Cuyahoga Land Bank President Gus Frangos told News 5 another remedy is if banks would write down the loans on homes that are underwater.”

I find this idea to be quite amusing.

“Frangos said if banks would make targeted adjustments, and reduce loan amounts on homes that have lost significant value, it would dramatically help distressed neighborhoods.”

“Reduce loan amounts”. Dream on.

“Frangos said loan recalibration would also help banks, who take on plenty of issues when a home is foreclosed or if the homeowner simply walks away from the house.”

Banks are helped when they agree to suck it up and tell borrowers that they really don’t have to pay back to the bank money that was borrowed. Got it.
Plus: Imagine what the outcome would be if the word got out that some borrowers did not have to make payments on their mortgages. There’s a saying: If some don’t have to pay then no one should have to pay.

This sounds like something a borrower would say. Probably not the lender though. Funny how that is.

I remember 10 years ago when we talked about how there is already a write down process. It’s called foreclosure. It’s painful for everyone but it works. But last time “we” decided it was intolerable for the bankers.

Yoinks, let’s do some math: “A minimum annual income of $122,340 was needed to qualify for the purchase of a $564,270 statewide median-priced, existing single-family home in the fourth quarter of 2018.”
That’s 4.6x income and probably not uncommon. With 10% down That’s a $3,703 nut including taxes PMI, etc. Take-home on that income is probably $7k max after 401k, health insurance, etc. is deducted.

So there are no doubt millions of CA families spending ~53% of their take-home on housing, not including maintenance, utilities, etc. New normal?

That seems to be the expected new normal even in midwestern places of some esteem like Ann Arbor Michigan! The decent homes here — either pretend charming smallish older homes near town center or the 2500 sf new homes built by Toll or Pulte on tiny lots in swampy reclaimed farmland further from downtown are listing at 500k or more and those feel very median in many wAys in terms of the range of House prices and ‘quAlity’ . So that’s what you’d be buying around her me with I’d say 140k or so gross household, and if you have a ‘mere’ 110 or so k gross you’d be hard pressed to find something really very starter-home-y for under 400k in a desirable neighborhood. It’s silly and I cannot imagine people are happy to be so house poor if they don’t believe they can turn around and sell for a profit. We have relatively high median income and with tech jobs maybe increasingly so, but it also feels like those tech jobs move around and you’d be concerned about buying too high and needing to move for work?!

“Former Cuyahoga County Treasurer Jim Rokakis told News 5 there are ways to recover housing values in these neighborhoods, but he said it will be a slow and difficult process. ‘It’s the greatest financial crisis of our lifetime,’ Rokakis said. ‘It’s tragic for a lot of reasons. It’s tragic because it has proved to be a wealth stripper. All those people out there, 65, 70, 75 year old, who because of the mortgage crisis, have seen their houses lose 50, 60, 70 percent of its value.’”

“In Miami’s overbuilt high-end condominium market, a complex game of cat-and-mouse is being played, as sellers try to push their advantage and buyers shop for bargains, observers say.”

“‘The No. 1 metric in our industry to measure the health of the market is the number of remaining months of supply: today’s inventory divided by the average number of monthly sales,’ said Ron Shuffield, CEO of EWM Realty International. ‘The remaining supply of Miami-Dade condos priced at $1 million or more reflected 57 months’ supply (based upon fourth quarter 2018 sales). The optimum supply for properties priced in excess of $1 million ranges from 12 to 18 months. This over-supply, of almost a five-year inventory, will continue to place pressure on pricing.’”

LOL cat-and-mouse? advantage? The market has been cratering for a while and since 2014 for super high-end condos! What advantage are we talking about? More cocaine drug money from South America?

“Housing affordability in Santa Barbara County jumped from 18 percent in fourth-quarter 2017 to 32 percent in fourth-quarter 2018, primarily due to a sharp drop in the median home price, which fell from $710,000 in fourth-quarter 2017 to $514,950 in fourth-quarter 2018.”

Wow! A sharp drop in the median can only be a sharp drop in all of the data points within the distribution. Professor?

That would be the case if the sale price distribution maintained its shape at a market turning point, but I don’t believe that is what happens.

There is characteristic asymmetry between the bid and asked distributions, as the bid (willingness to pay) distribution is limited above by buyer purchase budget constraints for all but the superrich market niche, where the sky is the limit. By contrast, the ask (or more precisely, willingness to accept) distribution reflects seller reservation prices, which may be effectively constrained by the remaining mortgage balance, or whatever amount the seller decides they need to sell for in order to move somewhere else.

In a seller’s market, such as the one which recently ended, a many-to-one relationship between buyers in the market who are willing to pay a given seller’s reservation price and any given house for sale suggests the sales price distribution is defined by the maximum order statistic of buyers willing to purchase that given house.

Now if a change in tax law, increase in interest rates, unrealistic seller expectations for never-ending high rates of price increase, or perhaps even the mere realization among buyers that prices have reached insane heights, suddenly gives buyers a collective case of cold feet, a perceived shortage can quickly morph into an inventory glut, where there is a many-to-one ratio of sellers to any given buyer. Suddenly it is the distribution of seller reservation prices which constrains the sale price, as there is no need to overbid when there are no other buyers, and a buyer who loses a deal has many other homes on the market from which to choose.

There is no reason to expect the distribution of seller reservation prices, which determines sale prices in a buyer’s market, will resemble the bid distribution that characterizes sales prices in a seller’s market.

Another point to consider is that the factors that affect the buyer purchase budget constraint distribution, such as interest rates, lending standards, or tax law, move on shorter time scales than the distribution of seller reservation prices, which is more immobile over short time horizons. If the buyer willingness to pay distribution lurches to the left, due to a spike in interest rates, for instance, the overlap between the upper tail of the buyer bid distribution and the seller asked distribution will thin out, resulting in fewer potential sales at a lower median sale price. It’s the overlap of the two tails that determines the median of the sale price distribution.

Now iffin’ Jesus.of.Bethlehem where to manifest in person tomorrow & kindly ask American bidne$$ folk$ if it were possible to “freely.give” x1 loaf of bread for every man, woman & child, everyday, … whys, eye believe that would bee quite easily & financially po$$ible to accompli$h.

The $hortfall grew by 42 percent between the October to December period, compared with the same three months the previous year, according to the latest Trea$ury monthly budget report released on Wednesday. Receipts climbed by 0.2 percent to $771.2 billion, while $pending was up 9.6 percent to $1.1 trillion$.

“The sheriff’s office posted that deputies were dispatched at about 1 p.m. to a location in the 5800 block of West U.S. Highway 60 for a man with a gunshot wound. On Monday afternoon, the office said the victim was Chris Gatley, 48, the owner of 417 Rentals. ”

Things are getting out of hand. What brilliant moron thought buying 500 houses for rent is a good idea? Can you buy an apartment with 500 units? One roof vs 500 roofs?

“Northeast Ohio housing experts say it’s yet another indication of how hard our area was hit by the 2008 housing crash. According to ATTOM Data Solutions, Northeast Ohio has six zip codes where more than half the homeowners have mortgage loans that have a higher balance than what their home is currently worth.”

How would you describe today’s housing market in much of US? A buyer’s market, or seller’s market? I think it is no longer a seller’s market but it is not a buyer’s market either. Not yet. It is more like a “sellers in denial” market. Comment?

I have to say that I notice more For Sale signs on people’s yards and more Open House signs on weekends this February than I recall seeing in previous San Diego winters. And this is one of the soggiest winters we’ve had since moving here over a decade ago. Rain in San Diego has the same effect on buyer traffic as a blizzard in Chicago.

Probably a stupid question, but I’ll ask anyway: suppose my mortgage originated at a bank, then the bank sold that mortgage to a non-bank lender. I am making the P&I payments and escrowing the property taxes with than non-bank lender now. Why is there now coertion/incentive to refinance the loan and originate it at a lower rate at that lender now, when they are already now collecting the payments on the existing loan?

Understood — I’m just trying to follow the money as far as why lenders who acquire non-distressed loans from other lenders are so psychotic about refinancing them after they are acquired.

Our mortgage has been though three so far: the first did nothing more than collect the payment each month, the second was FedExing refi offers to us almost weekly for several years, the third has not been quite as aggressive, but is still contacting us regularly.

If the purpose of this is to coerce us to HELOC or pull equity out, that I guess I could understand, but we have absolutely no intention of ever doing so. We just have a standard 30-year fixed, and I’d just assume either balloon out of it when the time comes or just continue keeping it current otherwise.